Analysis: EU and Central Asian gas

WASHINGTON, April 22 (UPI) -- The European Union, gazing hungrily at Central Asia's vast oil and natural gas deposits, has long sought to weaken Russia's grip over Caspian exports. Now the EU has succeeded in getting its nose under the Turkmen tent, and in Moscow Gazprom Chief Executive Officer Alexei Miller must be drowning his sorrows, as Russia provides about 40 percent of the EU's natural gas imports.

The meetings, which also included the foreign ministers of Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, were held under the auspices of the EU Central Asia Strategy, formulated last year, designed to develop relations between the EU and post-Soviet Central Asian nations.

The meeting was driven by the 27-nation EU's soaring demand for natural gas, which is expected to grow to 536 billion cubic meters by 2010 and 619 bcm a decade later.

At a news conference following the meetings, Kouchner said that when France assumed the EU presidency energy will become the main priority of EU policy.

"Europe is interested in the diversification of energy sources and our friends from Central Asia are ready to think together with us about the energy issue," he said. "The president of Turkmenistan has made a decision to supply gas to Europe. It is a very good decision and the EU welcomes it."

In a subsequent interview with the nCa news agency, Kouchner commented on the proposed Nabucco and Trans-Caspian pipelines.

"Yes, there is certainly some hope. The president has decided to furnish Europe, and of course France, with gas," he said. "This is a very good decision, according to our opinion.

"It is highly welcomed by the EU because it was a troika meeting, and also by us, the French people, because it was exactly one of our purposes. We want to diversify the sources of our energy supplies."

Morel added: "There was talk on Trans-Caspian, handling of all the studies. As you know, the (European) Commission has made an in-depth consideration of all the possible options.

"Yes, we are very much considering a concrete approach -- economic and technical options. The idea of the energy corridor is connected with Nabucco."

A common, if unstated, animus shared by both the EU and Central Asia was concern over Moscow's capricious and arbitrary pipeline politics, which underpaid Central Asian producers while subjecting EU, Central and Eastern European members to politically motivated shortages and stoppages. Rupel alluded to a common desire to lessen the Kremlin's role as middleman, while he referred to "trade without intermediaries."

Behind the euphoria in Brussels over its diplomatic coup, however, remains one uncomfortable fact -- all Central Asian natural gas exports to the EU flow through Russian pipelines controlled by Transneft. Russia has used its pipeline monopoly in the past to indicate its displeasure with consumers' politics by lessening or halting supplies, a possibility obviously far from the minds of the EU negotiators on the shores of the Caspian.

An additional ace up the EU's bargaining sleeve is its high-tech energy technology, which would be essential to Ashgabat's plans to increase output. Signaling Turkmen interest in Western investment, on April 16 a Turkmen delegation including Vice Premier Tachberdy Tagiev, Oil and Gas Minister Baymyrat Khodzhamuhammedov and Bayrammyrat Myradov, head of Turkmenistan's hydrocarbons development agency, attended the Turkmenistan Oil and Gas conference in London.

Last year British Energy Minister Malcolm Wicks visited Turkmenistan, the first such visit by a British minister for a decade. London is touting its North Sea expertise to the Turkmen delegation.

Despite the champagne toasts in Ashgabat, Turkmenistan does not yet have an EU Partnership Cooperation Agreement, a 10-year bilateral agreement-based political cooperation between the EU and an individual country; Kazakhstan, Kyrgyzstan and Uzbekistan all signed and ratified PCAs in the 1990s.

There also remains the small issue of getting Turkmen natural gas to domestic consumers. If constructed, the 1,800-mile Nabucco pipeline will be Europe's longest and costliest, with final price estimated at more than $7.9 billion. The Trans-Caspian pipeline as yet remains on paper. Both projects are likely to draw flak from Russia and Iran, marginalized on the sidelines.

There also exists the minor point that, while Turkmenistan's annual production stands at about 60 bcm, it has already signed an agreement with China to begin in 2009 providing 30 bcm of gas annually, in addition to agreements with Russia for 50 bcm and Iran for 8 bcm, in effect already agreeing to provide 28 bcm more than the country produces. In such a situation, thoughtful analysts might wonder where the volumes of EU promised gas imports are to come from, but such considerations are obviously far from the minds of the Eurocrats. Given the above, it is probably fair to observe that for someone, it's going to be a long, cold winter.

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